Since the beginning of 2022, under the strong leadership of the CPC Central Committee
with Comrade Xi Jinping at its core, regions across China and all government
departments and agencies coordinated COVID-19 containment and social and
economic development amid profound changes unseen in a century, which were
compounded by the pandemic. The national economy had a smooth start to the year
with the GDP and the CPI registering year-on-year growth of 4.8 percent and 1.1
percent, respectively, in Q1. Following the guidance of Xi Jinping Thought on
Socialism with Chinese Characteristics for a New Era, the People's Bank of China (PBC)
resolutely implemented the decisions and arrangements of the CPC Central Committee
and the State Council. Seeking progress while ensuring stability, with the latter as a top
priority, the PBC pursued a sound monetary policy, which was flexible and appropriate,
and it introduced policies in a proactive way, thereby helping to maintain the stability
of the national economy.
First,
liquidity was kept adequate at a reasonable level. On April 15, the PBC
announced a required reserve ratio (RRR) cut by 0.25 percentage points for financial
institutions, which released about RMB530 billion of long-term liquidity. In the first
four months, the PBC acted proactively and turned over its accumulated profits in the
amount of RMB600 billion to the central government, which could be equal to an
injection of base money of the same amount. In Q1, the PBC injected RMB400 billion
of long-term liquidity in the market through the Medium-term Lending Facility (MLF)
operations. Those moves were to guide financial institutions to make appropriate
arrangements for loan issuances and enhance the stability of the aggregate credit growth.
Second, monetary policy instruments were given full play in adjusting both the
aggregate and the structure. The PBC made full use of the facilities supporting inclusive
micro and small business (MSB) loans, increased central bank lending for agro-related
businesses and MSBs, and ensured good use of the carbon emission reduction facility
(CERF)
. In addition, it launched two new central bank lending facilities, one in the
amount of RMB200 billion for sci-tech innovation and the other in the amount of
RMB40 billion for inclusive elderly care services, and it provided an additional
RMB100 billion quota for the central bank lending supporting coal development and
utilization as well as reserve capacity enhancement. Multiple measures were rolled out
to support coordinated development across regions. Third, the overall financing costs
for businesses were guided to remain stable with a slight decline. In January, with the
rates on 1-year MLF operations and 7-day open market operations (OMOs) both
dropping 10 basis points (bps), the one-year and above-five-year loan prime rates (LPR)
declined 10 bps and 5 bps, respectively, due to the effect of the LPR reform. Financial
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institutions were thus guided to forgo some profits to benefit the real economy. Fourth,
attention was paid to maintaining a balance between internal and external equilibria.
While deepening the market-oriented reform of the exchange rate and maintaining a
managed floating exchange rate regime based on market supply and demand with
reference to a basket of currencies, the PBC enhanced the flexibility of the RMB
exchange rate and strengthened expectation management to give play to the role of the
exchange rate in macroeconomic management and as an auto stabilizer for the balance
of payments. Fifth, important achievements were made in forestalling and defusing
financial risks. The PBC upheld market principles and the rule of law for risk resolution,
and financial risks were generally contained.
Overall, since the beginning of 2022, the monetary policy has been more forwardlooking, precise, and independent backed by proactive measures, and the financial
sector has been improving the quality and efficiency of its services for the real economy.
In Q1, new RMB loans reached RMB8.3 trillion, RMB663.6 billion more than the
growth during the same period of last year. At end-March, broad money (M2) and
outstanding aggregate financing to the real economy (AFRE) recorded year-on-year
growth of 9.7 percent and 10.6 percent, respectively, an acceleration of 0.7 and 0.3
percentage points from end-2021. Key areas and weak links, such as sci-tech innovation,
green development, and MSBs, received more support from the financial sector. At endMarch, inclusive MSB loans and medium and long-term (MLT) loans to the
manufacturing sector grew by 24.6 percent and 29.5 percent year on year, respectively.
In Q1, the weighted average rate on corporate loans registered 4.4 percent, down 0.21
percentage points from 2021. The RMB exchange rate moved in both directions and
remained basically stable at an adaptive and equilibrium level. The central parity of the
RMB against the US dollar was 6.3482 at end-March, an appreciation of 0.4 percent
from end-2021.
Recently, as risks and challenges rise due to COVID-19 and the Ukraine crisis, the
environment for China’s economic development has become more complex and severe,
with greater uncertainties. However, it should also be noted that our development still
enjoys a fairly large number of strategic advantages, such as a large-scale economy,
ample room for policy adjustments, high resilience, and an enormous market. Therefore,
the fundamentals for sound growth over the long run remain unchanged.
In the next
stage, under the guidance of Xi Jinping Thought on Socialism with Chinese
Characteristics for a New Era, the PBC will follow the guidelines of the 19th CPC
National Congress, the plenary sessions of the 19th CPC Central Committee, and the
Central Economic Work Conference as well as the requirements set forth in the Report
on the Work of the Government. Following the decisions and arrangements of the CPC
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Central Committee and the State Council, the PBC will pursue progress while ensuring
stability and take stability as its top priority. Applying the new development philosophy
fully, faithfully, and comprehensively, it will speed up the building of a new
development paradigm. It will work to ensure stability of growth, employment, and
prices while deepening the supply-side structural reform. Meanwhile, it will develop a
modern central banking system and improve the modern monetary policy framework.
With these efforts, it will contribute to high-quality development and maintain
macroeconomic stability.
